Lina Khan on Amazon’s Antitrust Paradox

Should we break up Amazon and Facebook? Columbia Law School academic fellow Lina Khan, who wrote the impactful “Amazon’s Antitrust Paradox" for The Yale Law Journal, joins Verge editor-in-chief Nilay Patel to discuss whether Amazon and Facebook should be broken up and what it might look like if that were to happen. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 0:58Nilay Patel?

  Hey everybody, it's Niamh from The Vergecast. On this week's interview episode, we have Lina Khan, who is someone I've been wanting to talk to for a long time. So when Lina was a law student at Yale, she wrote this paper called "Amazon's Antitrust Paradox," which basically laid out the case for regulating Amazon. And it said that even though Amazon lowers prices, you have to look at its effects on the entire market of tech and services and say, hey, this is a monopoly. She wrote this while she was a law student, and it kicked off an entire wave of rethinking antitrust policy in America. She ended up at the Federal Trade Commission, working for Commissioner Rohit Chopra. She's since left there, now she's a fellow at Columbia University, and she's part of the Open Markets Institute. But she's someone who literally wrote a paper in law school that you can go read.

• 1:42Nilay Patel?

  It's pinned on her Twitter account. Go read it, it's very interesting. But she wrote this paper in law school and kicked off a huge rethink about how we treat Amazon, Facebook, Google, Apple, Microsoft. And I've been wanting to talk to her about it for a long time. So we sat down, we talked about it, she laid out the case for regulating these companies. She laid out all the reasons she thinks Amazon is able to use its market power to actually reduce competition in America, which I think you know I am super interested in talking about. And of course, you can't skip it in these times. We talked about Facebook. So here is Lina Khan.

• 2:19Nilay Patel?

  All right, Lina Khan, welcome.

• 2:21Speaker 03

  Good to be here.

• 2:22Nilay Patel?

  It's great to have you. You're like a superstar. You were at Yale Law School. You wrote a paper called "Amazon's Antitrust Paradox." You kicked off a, like, a pretty big rethinking of how antitrust works and how it should work with the big tech companies that often give things away for free or cheap. You went to Open Markets Institute, which is a think tank. Then you were at the FTC for a minute. Now you're back and you're at Columbia Law School. That's a lot. Do you feel like, walking down the street, like, I'm doing it? Like, I'm changing antitrust in America?

• 2:55Speaker 03

  You know, it's really exciting that the public interest in antitrust has increased dramatically over the last couple of years. I mean, I started working on these issues in 2011 in DC at a different think tank. And, you know, DC is a pretty wonky place, but if I was at a party and I told somebody I worked on antitrust issue, you know, their eyes would glaze over. I mean, it really did not register as being connected to issues that people understood or cared about. And this is part of the broader story of antitrust, of how it became so technocratic and removed from public consciousness. And so the fact that that has changed in the last couple of years, I think, is making this a really interesting and exciting time, especially as we're seeing concentrations of market power across our economy.

• 3:38Nilay Patel?

  Yeah, even when I was in law school, 2006, the antitrust people were like the nerdiest, scariest, most boring. And now, everyone kind of understands that Facebook might be too big. Like, that shift has just really occurred over time. And your paper, I think, is part of it. I want to start, basically, at the start, which is, you wrote a paper, Yale Law Review, "Amazon's Antitrust Paradox." Would you just kind of walk us through the argument you made there?

• 4:04Speaker 03

  Sure. So the argument I made was that Amazon is a really elegant illustration of how the current framework in antitrust, the consumer welfare framework... Really fails to capture forms of market power and forms of dominance that should be relevant to antitrust and do raise competition concerns. And so I was writing about Amazon because I think aspects of Amazon's business strategy, specific practices that it used to become as dominant as it is, are a really useful vessel for talking about these broader shifts in antitrust. And so, you know, before I went to law school, I was a journalist and a policy researcher and had spent some time interviewing the merchants that sell on Amazon, just to try

• 4:49Speaker 03

  and understand, you know, what are the business practices here? What are the contractual terms? What is the kind of day-to-day reality for these millions of merchants that feel dependent on Amazon, right? They feel that the only way they can really get to market in the internet age is by using Amazon, by selling on Amazon. And then also by interviewing investors, hedge funds, venture capitalists, to try and see how Wall Street was thinking about Amazon and the dominance it was amassing. Those perspectives, kind of people who have money on the line and interacting with Amazon and how they see the company, really helped shape how I think about the company's power. And then thinking about how these people were thinking about Amazon and then thinking about how current antitrust law perceives Amazon, just revealed this gap. And I was interested in exploring this back gap and interested in thinking about how

• 5:34Speaker 03

  antitrust should be reformed in order to reflect the new realities of how market power gets exercised.

• 5:41Nilay Patel?

  And so the really TLDR version of where we are right now with antitrust as the standard is something called the consumer welfare standard, which you've been listening to VertChats, we talk about a lot, actually. But it's the notion that there's only an antitrust problem if prices are going up, right? If companies consolidate a part of a market, they have a monopoly, they raise consumer prices, there's some harm, we should break that up to have more competition. But if prices are stable or going down, you probably don't have a problem. And Amazon, obviously, has very low prices, but they have all this ancillary power. All across the rest of the internet, basically. Google's prices are zero, so it's like very hard to articulate a harm in Facebook, right? Is that-

• 6:17Speaker 03

  Or we pay in data, yeah. I'm reluctant to say that they're free services.

• 6:21Nilay Patel?

  Right, but the dollar amount-

• 6:22Speaker 03

  The dollar amount we pay is zero, that's right. Yeah, I mean, that's the super TLDR version because there is a debate about what consumer welfare means. Some people say, "Well, actually, it's a more capacious, more expansive standard that can encompass all sorts of other features like quality and innovation and whatnot." But it's very true that in practice, the way this ends up getting applied is that it's sensitive to price and output foremost. Because these other things are harder to measure, that's why antitrust has become so price-centric.

• 6:50Nilay Patel?

  So you identified a gap, and we actually just wrote a really long feature about the weird shadow economy for marketplace sellers, where there are law firms that write letters-

• 6:59Speaker 03

  That was an amazing article. I've sent that to so many people. One of the people you profiled in that piece is like a lawyer in Dallas, and I want to like go talk to her. I partly live in Dallas, so I love that. That was amazing reporting.

• 7:09Nilay Patel?

  We'll make the connect. The reporter wrote us, and after when we're done with this, we'll go out there and say hi. But, um, so, right, there's like a shadow economy for Amazon marketplace merchants. They're figuring out how to basically scam themselves. Then you see hedge funders and investors saying, "Hey, they're consolidating the market that we participate in." But at the same time, the consumer prices and Amazon charges are low, are going down. And so there's a gap between sort of antitrust enforcement and what the other part of the market is saying. Is that the gap you identified?

• 7:39Speaker 03

  The way you start an antitrust inquiry, to nerd out a little bit, is you say, "What is the relevant market?" So you start by focusing on one market and start identifying the harms in those markets. The problem is, Amazon is in so many markets, and it basically leverages its position in different markets in all sorts of intersecting ways. So if your approach to Amazon is really to silo one particular aspect of the business, that can really miss the broader structural power that it's amassing. And so in part, it was because I was starting from this broader lens, I was able to pick up on just business strategies that Amazon's using, such that it's, you know, collecting data in this light of business and then using that to inform its business strategy over here.

• 8:22Speaker 03

  Just dynamics that are enabled by the digital markets and that antitrust is just a little crude in catching up to. One aspect, and this is not necessarily like an antitrust violation or an antitrust issue, but one really interesting feature- Is that Amazon has been reported to use AWS to identify which businesses are going fast, which startups are going fast, and then uses that data to then invest through its venture capital arm in these businesses. Right, so that's just one example of how, when you're involved in so many different markets, there are just insights that you can apply across different business arms. And that sort of dynamic is something that I think the current approach to antitrust misses sometimes.

• 9:02Nilay Patel?

  Right, because how do you even identify what market is being affected by this other market? This is really interesting, because I think about AWS, it's Amazon's profit center.

• 9:11Speaker 03

  Yeah.

• 9:12Nilay Patel?

  It insulates the other business entirely, and everyone thinks of Amazon as this retail company, but they run that retail business at like zero, right? The tiny little margins, and then Walmart, as a competitor, cannot do that. I don't know how you can look at that and say there's fair competition in this market, or even how you would design a policy to ensure competition in that kind of market.

• 9:33Speaker 03

  Yeah, I mean, there are a few issues in what you just brought up. One is, as you point out, most people think of Amazon as a retailer, but I think a more accurate way to think of Amazon is as a form of infrastructure. Right? It provides the infrastructure for online commerce through its platform. It has an enormous logistics, physical logistics network that is the physical infrastructure for all of these merchants, and then it has the cloud computing provider, which is now, you know, the virtual infrastructure. And so, in all of these aspects of its business, it is kind of the 21st century railroad, where if you want to get to market as a merchant, as a startup, as a business, you have to ride Amazon. And so, you know, there was one venture capitalist who I think described Amazon's strategy as really wanting to tax every form of economic activity, just slicing a little piece off

• 10:17Speaker 03

  of it. And so I think that complicates how we understand Amazon. I think your point about AWS being the cash cow is just another element of how, you know, it's able to cross-subsidize across businesses in ways that just give it this huge advantage, right? I mean, who else can just overnight decide to buy Whole Foods and drop, you know, close to $14 billion in that acquisition, right? And so, most retailers are not in that position.

• 10:44Nilay Patel?

  Just from my perspective, it's like they bought Whole Foods and they've never really said like what the plan is. Like, we're gonna figure it out. Like, this seems great. This is like, we've never been able to groceries, Whole Foods needs a buyer, here we are, now we have, I don't know, we'll put Echo's in Whole Foods and maybe that'll all just work itself out. And like, A, being able to have that sort of flexibility, that margin for error in your balance sheet is remarkable. I think there's, there's definitely a side of me, and I think a side of the Vergecast audience, thinks Amazon is great, right? Like, it's cool that there's a big company that can like, take big innovative flyers and they like, invent a bunch of stuff. On the flip side, I constantly worry that there's not enough competition in these markets. And I think that's, as I talk about the consumer wealth standard with our listeners and readers, and we talk about on the show, the thing I

• 11:27Nilay Patel?

  keep coming back to is, we need more competition in the market. And you kind of look at the European tradition, where that is the, sort of the point of the policy initiatives, is to create competition in the market. Are we at an inflection point here? Are more people taking that seriously now, that we should be regulating towards competition as opposed to towards, like, consumer outcomes?

• 11:47Speaker 03

  Yeah, it's an interesting question. I mean, what's notable about what you just said is that antitrust started in America, right? It's like, foundationally our tradition, that then we've managed to export into all these other regimes. But, as you point out, especially contrasted with Europe, we've kind of, our antitrust regime is really underperforming right now. I think, in some ways, we've been living under this natural experiment for 40 years, where, you know, in the late 1970s and 1980, we just flipped the switch, and we're like, okay, we've been doing antitrust one way, now let's just do it this other way. And I think right now, we're almost in the process of this reckoning with the world that that approach to antitrust has resulted in. And insofar as, you know, there are more studies showing that market after market is highly concentrated, that markups

• 12:31Speaker 03

  have increased by like, 300%, that all these firms are sitting on huge piles of cash, and instead of investing, they're, you know, last year, I think they issued like, a trillion dollars' worth in stock buybacks. I mean, these are metrics and signs that something is deeply wrong, and our markets are not competitive. And so, insofar as this empirical evidence is forcing people to rethink Maybe we should rejigger how we do antitrust. I think that's really productive. I mean, whether we're at an inflection point, the fact that the public discussion around these issues is much more robust and vibrant is really healthy. Congress is becoming more interested in these issues. Last year, the House of Representatives started an antitrust caucus for our members interested in this to become educated, to engage.

• 13:14Speaker 03

  If you watch the last few oversight hearings in antitrust, I mean, members of Congress are just becoming smarter and more interested in this. And so I think as Congress becomes more involved, that's really healthy because it helps show how antitrust is relevant to the public. And I think, right now, people are connecting the lack of competition to all these other problems across our economy and across our politics. And that doesn't mean that the excessive political power of companies should be like a factor in merger analysis, but the narrowing of antitrust meant that people even just stopped making these connections. And so I think redrawing those connections between economic structure and political outcomes is really important.

• 13:56Nilay Patel?

  So I was reading the AT&T Time Warner merger decision, District Court in DC, and it just struck me that, missing the forest for the trees. I mean, it's hundreds of pages of technical analysis about whether prices will rise 30 cents, and zero discussion of, hey, AT&T owns the pipes and the content, and it is almost certain that they will discriminate against other content providers. How did we end up there? The court isn't even saying this obvious harm that exists, like they will discriminate against Netflix, just doesn't come up. Is that part of that narrowing, or is that just one judge not understanding what was going on?

• 14:34Speaker 03

  I think that judge was an extreme example of a broader phenomena in antitrust, which is that there's a very particular type of neoclassical economics that is used to inform how we think about antitrust. And neoclassical economics assumes a bunch of things around how markets will self-correct, around how entry barriers are minimal, just assumptions that, over the last few decades, we've seen don't actually always correspond to reality. And so I think at the center of how we currently do antitrust analysis is a set of assumptions about markets that are just deeply flawed. And I think that's, in part, what leads to pretty erroneous decisions.

• 15:10Nilay Patel?

  Give me some of those assumptions.

• 15:12Speaker 03

  The main kind of intervention of the Chicago School was they said, you know, the way we do antitrust is so amorphous. It's just this balancing of all these vague values. It ends up leading to all these absurd situations where we're blocking mergers that are only concentrating 5% of the market. We really need a much more rigorous approach. And so they introduced what's known as price theory. It's a particular form of economic analysis. And there were a few assumptions that they offered. One was the idea that markets generally self-correct. The idea that market power, if it ever arises in the economy, is likely to be very fleeting because, of course, any time a monopolist would try to jack up the price, which is the only real form of harm, you would see this rush of competitors that would discipline

• 15:57Speaker 03

  that firm and kind of compete away those supra-monopolistic profits. So there was a sense that generally, we don't have to worry about market power and monopoly power, save in exceptional market failure-type situations, like in natural monopolies or whatnot. And in order for that dynamic to happen, we don't really have entry barriers. The idea that if there is some, if there is a way in which a dominant company is abusing its market power, you're just going to see competitors show up because, of course, you know, what's stopping you from tomorrow, starting a business and competing with this person?

• 16:28Nilay Patel?

  I hear this all the time.

• 16:29Speaker 03

  So, yeah, so this is the kind of theory that was offered and that ended up forming the basis for how antitrust analysis gets done. What's interesting is that, you know, a lot of economics has actually evolved past the kind of neoclassical assumptions, but I, and I think those forms of insights have been incorporated in all sorts of other areas of law. I think in some ways, antitrust is this backwater of, you know, more old-school economic analysis that doesn't correspond to reality. And I think one thing that's been interesting for me is actually reading more Wall Street analysis and seeing how investors react to, say, a particular merger. And oftentimes, you know, they are aware of market dynamics that the theory is really not capturing.

• 17:13Speaker 03

  And so, again, you see this gap between how Wall Street and markets react to new mergers and new competitive realities and how the law is able to recognize those. And there's just a huge blind spot in the law.

• 17:24Nilay Patel?

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• 18:36Nilay Patel?

  All right, back to my conversation with Lena Khan. So let me ask you the hardest question of all. I think the question. Should we just break up Facebook? I'm just asking you directly. Is it just time to go full Tim Wu and blow this thing up? Do they have too much market power? It'd be better if independent Instagram was competing with an independent Facebook?

• 18:56Speaker 03

  I think that's right. I think in hindsight, allowing them to buy up both WhatsApp and Instagram proved to have been the wrong call insofar as both of those acquisitions did seem to substantially lessen competition. I mean, to make that a little bit more concrete, I mean, let's think about over the last year as we've seen revelation after revelation about how Facebook's security and privacy practices were quite weak. We've heard from, you know, just among my friends, among people generally heard, "I'm quitting Facebook. I'm shutting down my account, but it's OK because I have Instagram." Right, and I think that's an example of how having all of these properties under the Facebook empire means that we haven't really seen competition on privacy issues, right?

• 19:38Speaker 03

  And I think this is especially significant with regards to WhatsApp, which, you know, was introduced as being especially sensitive to security and privacy issues. And then when Facebook acquired them, there was a, you know, they made all sorts of promises and representations about how they would maintain those same levels of commitments. And then gradually over the years, bit by bit, they've chipped away at that. And so if you had a competitive marketplace, there would be an opportunity for people to compete on privacy. And that's just not something we've seen. The fact that Facebook also now has internally a piece of technology that lets it track in very close detail which rival applications are diverting attention from Facebook, information then it then uses to either go buy up that company at the very earliest stages before

• 20:21Speaker 03

  anybody outside really understands the competitive significance, or then just roll out a direct replica and kind of, you know, send that company reeling. That's a dynamic that I think also is not promoting real competition.

• 20:34Nilay Patel?

  So I just interviewed Shashana Zuboff on C-SPAN. Actually, it's not out yet. I don't know when C-SPAN is going to release this interview, but we talked for an hour. She wrote a book called The Age of Surveillance Capitalism. What she said in the interview, and I'm just curious for your thoughts on this, was there's an enormous amount of consumer demand for privacy, for things that aren't what she termed surveillance capitalism. And I think she said it was a generational business opportunity. You can change the world if you can just harness this amount of consumer demand for basically treating your data with respect. That's a market correction, right? Like if some, if Apple is just like, we're keeping your stuff private, we're not tracking you, they're one of the most valuable companies in the world. Is that not a significant enough market force to kind of counterbalance the trade?

• 21:18Nilay Patel?

  Or do you need yet more competition in that market?

• 21:20Speaker 03

  So is the idea that if there were this market demand for privacy, we should be seeing new companies offering these things?

• 21:26Nilay Patel?

  It should get filled, right. Or is it just Apple happens to have its business model that fills it and that's the only demand that can be filled?

• 21:32Speaker 03

  Yeah, I mean, it's interesting to think about the dynamic, right? I mean, we've seen reporting around the kinds of questions that venture capitalists ask when, you know, they're confronted with a startup that has a business idea. And one of the first questions is, so what's going to keep Amazon, Google, or Facebook from eating your lunch? Right? And so I think partly it's that the dynamics of the marketplace have been such that if you have a good product or a good service, you're not really able to compete on the merits of that product or service, in part because these firms, especially Amazon and Google, control the marketplace, right? They control the arteries. And so I think in part, we need to inject competition into these markets, or at least have rules that prevent them from, say, appropriating or stealing the business value of people who actually have the ideas

• 22:15Speaker 03

  in order for us to see more, more products and services.

• 22:18Nilay Patel?

  What does that rule look like? Like, at a very basic sort of consumer experience level, I invent Dropbox. What does a rule preventing Google from introducing Google Drive look like?

• 22:30Speaker 03

  I think this is most clear in the Amazon context, insofar as Amazon both runs a marketplace and then sells Amazon branded goods. And so insofar as it's able to use its marketplace to basically identify what business is doing well and then roll those same goods out on the marketplace. I think that's where we see, I think, the most extreme form of this. I think in the other contexts, it's hard. I mean, there's, I think, a decent role for intellectual property law to play here in terms of protecting certain forms of business ideas and investments. But these are questions that are also going to require, you know, just more aggressive merger enforcement insofar as blocking the ability of these companies to acquire some of these firms and so on. But- I think we're just actually at the very earliest stages of figuring out what to do.

• 23:14Nilay Patel?

  Yeah.

• 23:14Speaker 03

  I think only very recently has everybody woken up to the fact that there's a big problem. Um, and I think now people are trying to figure out what to do about it.

• 23:21Nilay Patel?

  You just crossed the, hey, hey, everybody, there's only five companies in the world that matter.

• 23:25Speaker 03

  Exactly. And you know, the, I mean, I think the enforcers are also trying to figure out what to do, right? I mean, the FTC has been having these hearings that are pretty broadly trying to assess what are the problems? What tools do we have? Are our tools able to address these problems across the economy? Be pretty focused on the tech sector.

• 23:41Nilay Patel?

  If we're just at the place where we've identified harms, we kind of don't know remedies. What do you do with something like the news at Facebook? You know, Mark Zuckerberg is saying, I'm going to co-mingle the technical infrastructure of Instagram Messenger. Does that scare you? Like, how does a regulator go into that and say, okay, don't do that because we might break you up? Or do they say, do whatever you want, we're still going to break you up? Does that affect it? Because we read that as Mark Zuckerberg trying to get ahead of regulation.

• 24:05Speaker 03

  Of a potential breakup?

• 24:06Nilay Patel?

  Yeah.

• 24:07Speaker 03

  I would hope that enforcers wouldn't be, be influenced by attempts to sidestep their enforcement. But, you know, we've kind of lost the tradition of the breakup. And I mean, of course, Tim writes about this in his book, that structural remedies, yes, they're not to be taken lightly. But there have been a key remedy in antitrust, right? I mean, if we have a merger enforcement regime that is now very fact-specific, and oftentimes those facts are not available until after the fact, right? I mean, merger enforcement is all about predicting what's going to happen, right? Predicting how this company is going to use its newfound market power, but also predicting how this one merger is going to ripple across the market and potentially lead to other forms of consolidation. In the law is this idea that there is an incipience standard.

• 24:51Speaker 03

  The idea being that you, the merger enforcement is supposed to prevent not just the point at which we're going from like two companies to one company, but actually try to keep markets competitive from the get-go. And so even if there are mergers that are on the edge, but you think they could potentially lead to huge waves of consolidation across the market, those should be suspect under the law. I think the fact that we've moved away from that approach to one that views these mergers are much more benign means that we should also be willing to break them up when we get things wrong. And I think there's just been this unwillingness to do breakups or to do structural remedies more generally that we should revisit.

• 25:31Nilay Patel?

  That's really interesting, the idea that you can be more lenient in letting firms combine. But to balance that out, you have to be much more willing to break them apart. I don't think I've heard it formulated quite that way before.

• 25:42Speaker 03

  Yeah, I mean, I think my preference would be to be more rigorous on the front end. But I think if we're going to have an approach where we're not, then I think we have to be more open to admitting we made mistakes.

• 25:53Nilay Patel?

  Yeah. So what would it take to break up a company like Facebook or Amazon? What does it look like? What's step one, and then what's the process?

• 26:00Speaker 03

  So I think there's a first order institutional question about do you want to pursue this through an antitrust case, which would involve, you know, coming up with a theory of harm, coming up with a theory of liability, pursuing that case in the courts, having it be appealed. This could go on for a decade, and then landing at the question of remedy. You could either do it through Section 2 of the Sherman Act, which is all about monopolization and when single firm conduct is monopolizing. You could try to achieve it through what's known as Section 7 of the Clayton Act, which is all about merger enforcement. And so that's most applicable when you've approved a merger that you're now trying to undo. So that would be the kind of antitrust litigation approach. We could also try doing it through some kind of regulatory regime, right?

• 26:44Speaker 03

  I mean, some of the separations principles in the past were applied through, say, the FCC or through very sector-specific regulators. In this case, obviously, we don't have one for the tech companies. I think the FTC is probably best positioned, given that it has an authority known as the unfair methods of competition authority, which basically gives it broad leeway to identify what constitutes an unfair method of competition. They also have what's known as rulemaking power, which means they get to interpret laws, offer very specific interpretations of laws through this rulemaking process. And so if the FTC were to engage in something like that, it could potentially lead companies to have to break themselves up.

• 27:25Nilay Patel?

  So you're saying you can go directly through the courts, or the FTC could sort of have this ambient authority that they're constantly putting the pressure on, and the companies would just spontaneously... Sort of separate.

• 27:36Speaker 03

  Or you could have Congress legislate something on this.

• 27:39Nilay Patel?

  So if you're looking at the big five, which of them seems the most problematic, right? The big five being Apple, Microsoft, Google, Facebook, Amazon.

• 27:49Speaker 03

  Each is problematic for different reasons. I mean, I think when I, when I think about privacy, I think it's Google that concerns me the most, just given all the reports about all the different ways in which it collects data. When I think about access to markets and just more and more of economic activity being mediated through a single company, I think of Amazon, right? So I think each of these firms prompts some different concerns, not all of which are going to be addressed through antitrust and not all of which can be resolved through more competition generally, right? I mean, I think antitrust and competition are one slice of what's going on, but there are a lot of different forms of legal interventions that I think are necessary at this point.

• 28:29Nilay Patel?

  Yeah. Kashmir Halo Gizmodo is a great reporter. She's actually doing a series right now on trying to live one week at a time without each of the giants and basically finding that it's impossible. That to me is the, that's the one where the market no longer can help, right? If you just cannot live on the internet without touching Amazon, then we should probably pay more attention to what Amazon is doing and the amount of power it exerts. I'm stuck at the remedy question of, well, what are you going to do? As a consumer, there's not much you can do about Spotify serving music from Google Cloud if you don't want to have Google in your life. Like, there's literally nothing you can do. But I'm also not sure what a regulator could do about that either. Is that, is that something that you've like tried to pull apart? Like, what are the remedies here? What is the new standard and how would you drive the market towards that standard?

• 29:14Speaker 03

  Yeah, I mean, I think before we think of remedies, it's helpful to think of principles. So one principle we were talking about earlier is if you run and operate the marketplace, maybe you shouldn't be allowed to be in the businesses that are directly competing with all the firms on your marketplace, right? And so that's a principle you could apply to Amazon, Amazon Marketplace, to Android, certain kinds of Google apps, that sort of thing. Another principle is non-discrimination, right? So a net neutrality type approach for these platforms so that they're not able to pick winners and losers effectively. I think one around how do you draw lines to decide when a merger is one merger too far or one acquisition too far? At what point should the burden be shifted?

• 29:56Speaker 03

  So, right now, we're living in an antitrust regime where the burden is always on the government to show why a merger is anti-competitive. I think if we were to switch that to say, well, in certain instances, the burden's going to be on the company to show why it's pro-competitive, I think that could lead to very different outcomes, too.

• 30:13Nilay Patel?

  Yeah, I think that the concept of picking up your business and taking it elsewhere gets very, very difficult when your business to Facebook looks like a complete map of your personality in social graph. There's actually not anywhere else you can go, and then taking your business is like a very nebulous idea. I was looking at your Twitter feed today, and I've seen this come up quite a bit, actually, is that antitrust is actually a much more conservative idea. It's not part of necessarily the overly liberal tradition, but sort of the Republicans are as interested in breakups. The conservative tradition of antitrust is quite strong. Do you see that actually in practice? There's attention to this from both sides, or is this kind of like one party's leading the charge?

• 30:57Speaker 03

  I think we have seen attention on both sides on certain issues. So, especially around some of the tech issues, we have seen Republican members of Congress, you know, express concerns. Whether that's rooted in a deep concern about concentrations of power generally, or if it's concerned instead about biases against conservatives and other very self-interested political outcomes, I think, is an open question. But it's definitely true that there is a conservative, small-c conservative tradition of being skeptical of concentrations of power, whether that be public power or private power. And so, I think that's the way in which we've seen the antitrust movement be part of the conservative tradition in the past.

• 31:40Speaker 03

  I think, right now, we're not really seeing members from the Republican side, kind of, you know, being the, the flag bearers of like reviving antitrust. But I do think that, in terms of principles and values, there's definitely opportunity for antitrust to, to be a big tent.

• 31:55Nilay Patel?

  So, we've talked very big picture, but let's bring it down to human scale things. What can people do? Like, how, if you're interested in this, what are the next steps beyond just, your paper's free of the internet, you can go read the Amazon's antitrust paradox right now. What can you do? How do you push a legislator? How do you push a, an agency? Is there, is there something you can actually do to participate?

• 32:17Speaker 03

  So, the Federal Trade Commission, as I mentioned, has been hosting these hearings. So, they're asking for comments from the public. And so, I think, you know, submitting a comment, they have, I think, 12 or 13 different topics on which they're inviting comments. And they're going to read all of those comments and have to put together a report. And so, that becomes part of the public record. And so, that's one avenue for engaging. I think more generally, yeah, talking to legislators about this, talking to lawmakers about this, kind of putting antitrust back on the radar of kind of public consciousness and public awareness and an issue that people are going to get behind, I think is important.

• 32:51Nilay Patel?

  Do you think it's going to come up in sort of the 2020 cycle?

• 32:54Speaker 03

  I think that's very possible that it could be a key pillar, or a key issue in the 2020 campaign.

• 32:59Nilay Patel?

  Well, that sounds exhausting already, but I'm super into it. I really do think everyone should just go read your paper, because honestly, it's really good. But you've got other new stuff coming out soon, right?

• 33:09Speaker 03

  That's right. I have a paper coming out in the Columbia Law Review called "The Separation of Platforms in Commerce." And it's basically reviewing this principle that we've talked about, about, you know, if you're running the platform, if you're running a form of infrastructure, what kinds of potential limits should there be on what else you can do?

• 33:23Nilay Patel?

  That, to me, is the, the heart of it, right? Like, if you're Apple and you run the App Store, should you be able to preload all your services all the time? And one answer... Just seems an obvious yes, right? Like, this is how it works. You know, on the platform, you get to put Apple Music on it and you have three months away for free. On the other hand, it seems very obvious that it just disfavors anyone else from ever wanting to compete. Do you think that you should actually be prevented from doing that? Or do you think you should have more open access? Like, one remedy for that was like a browser ballot in Europe, right? Which is like a notorious nonstarter, but is that where you want things to go?

• 33:56Speaker 03

  I think how this gets played out in different contexts will vary because, you know, I mean, take Apple, for example. I mean, that's a much more closed ecosystem than, say, Android is, right? And so the question is, do you want to be punishing open ecosystems, relatively more open ecosystems over closed ones? I mean, I think there are some complicated questions here about how you would apply this. But I think what's unmistakable is that there is a tradition of applying this principle in network industries. So 100, 130 years ago, railroads started buying up coal mines. They started getting into the commodities business. And so there was this big problem where independent coal producers couldn't get to market because they would go to the railroad and the railroad would say, "Sorry, our cars are full." And so Congress ended up having some hearings and passing a law that said, "If you're a

• 34:41Speaker 03

  railroad that's treated as a common carrier, you're not allowed to transport any goods in which you have an interest." And this is a principle we applied in the TV networks, where for a period of time, we separated distribution from content production. It's a principle that informed how we did the AT&T breakup, where we separated the local exchanges from the long-distance pipes. It was one of the remedies that, at some point, was introduced to the Microsoft case, where we said, "You have to break up the operating system from the apps and the browser." So this is a principle that we've seen applied in various network industries. I think how we apply that principle in, with each tech platform and each tech market is an open question, but I do think giving this principle a seat back at the table is really important at this moment, as the conversation about remedies is starting to heat up.

• 35:26Nilay Patel?

  So do you use Amazon, Facebook, Google products and services? Like, if you're just a consumer in the market and you say, "Screw it, I'm boycotting Facebook today." Is that, is that gonna send enough of a signal into a market that is this consolidated?

• 35:40Speaker 03

  No, absolutely not. I mean, as you just mentioned, you know, Kashmir did that series where it shows it's like effectively impossible, right? Like there are parts of the internet that stop working for you if you don't use these services. And I think that gets to a deeper issue, which is that, you know, these are systemic issues. These are governance issues. These are political issues. And so expecting people to, in their consumer identity, try to tackle them really misperceives what the problem is. And I don't think that, you know, asking everyone to cancel their Prime accounts is really gonna be the way that we're gonna get to structural.

• 36:10Nilay Patel?

  Are you a Prime customer?

• 36:11Speaker 03

  I don't have a Prime account.

• 36:13Nilay Patel?

  I do. It's very convenient.

• 36:17Nilay Patel?

  All right, Lena, thank you so much. I really appreciate it. It was really fun talking to you.

• 36:20Speaker 03

  Likewise.

• 36:21Nilay Patel?

  All right, that was Lena Kahn. She's so smart. There's something happening with Anna Tristal in this country, and I think she's gonna be at the forefront of it. Okay, I can't tell you who we have on the interview episode next week, but it's huge. I think you're gonna be into it. We'll be back this week with a regular Vergecast on Friday, and then next Tuesday. It's big. You're gonna like it. Talk to you then.

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